In Porter’s Five Forces framework, which force concerns the bargaining power of suppliers, and which strategies can mitigate it?

• A. The bargaining power of suppliers; mitigate by supplier diversification, long-term contracts, and vertical integration or creating switching costs.
• B. The threat of new entrants; mitigate by economies of scale and brand loyalty.
• C. The bargaining power of buyers; mitigate by price discrimination.
• D. Rivalry among existing competitors; mitigate by product differentiation.

Answer: (A)

The main idea being tested is supplier bargaining power within Porter’s Five Forces. This force looks at how much leverage suppliers have to push up prices or impose terms when inputs are essential, few in number, or costly to replace. The best way to lessen that power is to reduce dependence on any one supplier and make it less attractive for them to push terms.

Diversifying suppliers spreads risk so no single supplier can dictate terms. Long-term contracts lock in favorable prices and stable arrangements, reducing price volatility and the supplier’s leverage. Vertical integration, where you bring input production in-house, removes external suppliers from the equation altogether and gives you direct control over critical inputs. Creating switching costs—making it costly for your organization to change suppliers due to specialized processes, compatibility, or invested systems—further discourages suppliers from pushing unfavorable terms because the cost of losing your business is higher.

Other options describe different forces: the threat of new entrants concerns barriers to entry and is mitigated by factors like economies of scale and brand loyalty; the bargaining power of buyers focuses on customers and can be mitigated by price discrimination; rivalry among existing competitors is about competition intensity and can be mitigated by product differentiation.